Glossary · UK
What is Director's Loan Account?
A running record of money a director has borrowed from, or lent to, their own company, separate from salary and dividends.
Full Definition
A director's loan account (DLA) is a record kept in a company's books of any money a director has taken out of, or put into, the company that is not salary, a dividend, or a reimbursed business expense. If a director withdraws more than they have put in, the account is "overdrawn" and the director effectively owes the company money. This has two main tax consequences under current rules: if the loan is not repaid within nine months of the company's year end, the company must pay a Section 455 charge (see s455-charge) -- currently 33.75%, matching the dividend upper rate -- on the outstanding balance, which HMRC refunds once the loan is repaid; and if an overdrawn loan exceeds £10,000 at any point in the tax year, it is normally treated as a benefit in kind, meaning the director may face an Income Tax charge (unless they pay a commercial rate of interest on it) and the company owes Class 1A employer National Insurance. Directors should keep DLA transactions clearly recorded and distinct from dividends, since HMRC can recharacterise informal or poorly documented withdrawals as either a loan requiring the s455 charge or, if the company had insufficient distributable reserves, an unlawful dividend that must be repaid.